Netflix Slips To Loss, Details Weak Outlook; Stock Tumbles

4/23/2012 5:51 PM ET

Netflix Inc. (NFLX: Quote) said Monday it slipped to a loss for the first quarter as continued investments in foreign markets offset a rise in revenue that topped Street estimates by a whisker. The company said the quarter was marked by a significant increase in Domestic Streaming subscriptions.

Going forward, Netflix detailed a weak revenue outlook for the second quarter, dragging its shares down by more than 16 percent in after-hours trade on the Nasdaq.

Netflix, which provides online and mail-order video service, has seen its stock price erode sharply owing to some faulty business decisions. Customers were upset last July when the company raised prices and threatened to split its convenient DVD and streaming media rental services. Following an uproar, the company announced that U.S. members would continue to use one website, but stood firm with the price hike.

The company also faces competition from the likes of Amazon.com Inc. (AMZN) which has been beefing up its own web-streaming service. Cable operator Comcast Corp. (CMCSA) has also announced the launch of a new subscription video service called Xfinity Streampix at a cheaper rate compared to Netflix's current streaming price.

Los Gatos, California-based Netflix said its Domestic Streaming segment added 1.7 million net members in the quarter, reaching a total of 23.4 million streaming members. The company cited new content additions, improvement to user-interfaces, and the receding impact of last year's brand hit, contributed to member growth.

In International Streaming, Netflix added 1.21 million members in the quarter, reaching a total subscription base of 3.07 million.

In Domestic DVD segment, Netflix lost 1.08 million members, ending the quarter with 10.09 million members. Going forward, Netflix believes DVD will continue to decline but at a slower pace.

Netflix reported first-quarter net loss of $4.6 million or $0.08 per share, compared to net income of $60.2 million or $1.11 per share last year.

On average, 29 analysts polled by Thomson Reuters expected a loss of $0.27 per share for the quarter. Analysts' estimates typically exclude special items.

The company said results for the quarter were impacted as subscription costs rose to $564 million from $377 million last year.

Looking ahead to the second quarter, Netflix expects results to range from a net loss of $6 million or $0.10 loss per share to a net profit of $8 million or $0.14 per share.

Netflix expects second-quarter Domestic Streaming revenue of $526 million to $534 million, Domestic DVD revenue of $287 million to $294 million, and International Streaming revenue of $60 million to $67 million.

Analysts currently expect Netflix to report a loss of $0.17 per share on revenue of $897.35 million for the second quarter.
Netflix expects to invest profit from domestic business in additional global expansion in order to position itself in the international markets.

NFLX closed Monday at $101.84, down $4.27 or 4.02%, on a volume of about 6.5 million shares on the Nasdaq. In after hours, the stock plunged $13.84 or 13.59%. In the past year, the stock has trended between $62.37 and $304.79.